Book Reviews | Gordon Campbell | News Flashes | Scoop Features | Scoop Video | Strange & Bizarre | Search

 


Jason Leopold: The Return of Voo-Doo Economics

The Return of Voo-Doo Economics


By Jason Leopold

This economic stuff is a bit confusing. President Bush says his $674 billion stimulus package--which boils down to huge tax cuts that mainly benefit the rich--will spur economic growth. In California, the nation's most populous state, Democratic Governor Gray Davis says he needs to raise taxes to close a staggering $35 billion deficit in addition to massive cuts to services. Republicans in Congress support Bush's tax cuts saying it doesn't just benefit the wealthy, while Republicans in California oppose Davis' move to increase taxes for the state's wealthiest citizens by as much as two percent to stimulate the economy in California. Bush says his plan will create jobs. Davis' plan will likely result in job cuts. Who's right? Or is this just politics as usual?

Has anyone seen or heard from Federal Reserve Chairman Alan Greenspan? Surely, Greenspan, the economy's resident psychic, can settle this nonsense by peeking into his crystal ball and tell us what the future holds under Bush's plan and throw in his two cents about Davis' package. California is, after all, the largest contributor to the nation's economy. But it seems that Greenspan is in a pickle. On the one hand, if he comes out in support of Bush's tax plan Democrats in the Senate said they would call for his resignation. On the other hand, if he opposes it he'll face the wrath of the Bush administration. So now Greenspan is in hiding (probably tidying up his resume).

It's easy to distrust Bush. Just look at his track record. But it's even easier to distrust Davis, who single-handedly turned a $12 billion surplus into a $35 billion deficit, which is larger than the entire budget of most U.S. states. Davis said the Internet bust in Silicon Valley and a downturn in the stock market, both of which contributed heavily to state coffers, were largely to blame. But since Davis became governor four years ago, government spending nearly doubled and his mishandling of the state's energy crisis in 2000 and 2001 cost the state tens of billions of dollars.

The one thing these two diametrically opposed economic plans have in common, judging by news reports, is that they are both largely opposed by millions of citizens and both are mired in politics. Yet President Bush and Governor Davis had the same message.

"We have one overriding task before us. We must come together to create new jobs and get our economy back on track. This task will not be easy. But it is essential if we're going to continue moving forward," Davis said last week.

"We've got some obstacles to overcome And one of those obstacles is to make sure people can find work, make sure this economy is strong and vibrant and hopeful, that the future is optimistic for every single citizen," Bush said last week.

So who's got the better stimulus package?

Robert Reich, the former labor secretary under President Clinton, explained Bush's economic plan in the simplest of terms in a column last week: "It's not a plan for 'growth and jobs'; it's a plan for rewarding the rich when what the economy needs is more spending by people of modest means. And it further concentrates wealth and power at a time when wealth and power are already in fewer and fewer hands."

In California, the exact opposite would happen under Davis' plan. The governor's announcement of tax increases and massive cuts to help erase red-ink sets the stage for a political battle. The tax proposals have support from Democrats, who want more money to protect programs, while Republicans call higher taxes damaging to the economy and vow to block any budget that includes them.

Nearly every state in the nation is facing a fiscal crises that forces cuts in education, law enforcement and health care. How does this impact Bush's economic plan, which provides a paltry $3.6 billion to help out the states?

"It is setting up an unwitting collision over fiscal policy between Washington and the states that will help determine the future of the economy and the fortunes of Main Street," according to the Christian Science Monitor.

By accelerating the income-tax cut and ending the dividend tax, Bush hopes Americans will spend more and invest more. The stock market fuelled the surpluses of the 1990s, as investors cashed in and paid huge capital-gains taxes. Now, their disappearance is the single greatest factor in the state budget crises and could lead to an economic disaster, the Monitor reported

To many, though, the Bush plan is full of dangers. For one, they say the centerpiece of the proposal - the repeal of the dividend tax - could work against states trying to dig out from deep deficits. Thirty-seven states depend on federal data to collect roughly $4 billion in dividend taxes. Without Washington's help, states would have to drop the tax or come up with a complicated formula of their own., the Monitor reported.

"Every dollar you give to states is a dollar that will go into the economy," says Iris Lav of the Center on Budget Policy and Priorities in Washington, in an interview with the paper. "It is the most direct stimulus." Instead, she adds, the states and the federal government continue to work largely at cross-purposes: "It very likely could be close to a wash."

Sounds like politics as usual.

******************

- Jason Leopold is an investigative journalist based in California, he is currently finishing a book on the California energy crisis. He can be contacted at jasonleopold@hotmail.com. This story is available for republication, please contact the author by email.

© Scoop Media

 
 
 
 
 
Top Scoops Headlines

 

Werewolf: Living With Rio’s Olympic Ruins

Mariana Cavalcanti Critics of the Olympic project can point a discernible pattern in the delivery of Olympics-related urban interventions: the belated but rushed inaugurations of faulty and/or unfinished infrastructures... More>>

Live Blog On Now: Open Source//Open Society Conference

The second annual Open Source Open Society Conference is a 2 day event taking place on 22-23 August 2016 at Michael Fowler Centre in Wellington… Scoop is hosting a live blog summarising the key points of this exciting conference. More>>

ALSO:

Buildup:

Gordon Campbell: On The Politicising Of The War On Drugs In Sport

It hasn’t been much fun at all to see how “war on drugs in sport” has become a proxy version of the Cold War, fixated on Russia. This weekend’s banning of the Russian long jumper Darya Klishina took that fixation to fresh extremes. More>>

ALSO:

Binoy Kampmark: Kevin Rudd’s Failed UN Secretary General Bid

Few sights are sadder in international diplomacy than seeing an aging figure desperate for honours. In a desperate effort to net them, he scurries around, cultivating, prodding, wishing to be noted. Finally, such an honour is netted, in all likelihood just to shut that overly keen individual up. More>>

Open Source / Open Society: The Scoop Foundation - An Open Model For NZ Media

Access to accurate, relevant and timely information is a crucial aspect of an open and transparent society. However, in our digital society information is in a state of flux with every aspect of its creation, delivery and consumption undergoing profound redefinition... More>>

Keeping Out The Vote: Gordon Campbell On The US Elections

I’ll focus here on just two ways that dis-enfranchisement is currently occurring in the US: (a) by the rigging of the boundary lines for voter districts and (b) by demanding elaborate photo IDs before people are allowed to cast their vote. More>>

Ramzy Baroud: Being Black Palestinian - Solidarity As A Welcome Pathology

It should come as no surprise that the loudest international solidarity that accompanied the continued spate of the killing of Black Americans comes from Palestine; that books have already been written and published by Palestinians about the plight of their Black brethren. In fact, that solidarity is mutual. More>>

ALSO:


Get More From Scoop

 
 
 
 
 
 
 
Top Scoops
Search Scoop  
 
 
Powered by Vodafone
NZ independent news